Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IndusInd Bank Ltd (BOM:532187, Financial) reported a healthy deposit growth of 15% year on year and 4% quarter on quarter.
- Loan growth was robust at 15% year on year, driven by 18% growth in retail loans and 13% growth in corporate loans.
- The bank's digital banking offering, INDIE, continues to see strong traction with 1.3 million customers.
- Gross NPA and net NPA were maintained at 2.02% and 0.60% respectively, with a healthy provision coverage ratio of 71%.
- Capital adequacy remains strong with CET1 at 16.15% and overall CRAR at 17.55%.
Negative Points
- The first quarter was challenging due to seasonal weakness, heatwaves, and election-related disruptions.
- Vehicle finance disbursements were lower due to subdued demand during the election phase and extreme heat.
- Collection efficiency in microfinance was impacted, with gross slippages from Bharat Financial at INR338 crore for the quarter.
- The cost to income ratio increased due to slower revenue growth from seasonally weak disbursements in vehicles and microfinance.
- There is some stress building up in the card business, with expectations of continued stress over the next two quarters.
Q & A Highlights
Q: In terms of gross advances, despite seasonality and disruptions, how do you plan to achieve 18%-23% growth? Also, why the resolution to raise equity given the healthy capital adequacy?
A: The resolution is an enabling clause taken annually. We are well-capitalized and currently do not see a need to raise capital. Regarding growth, we aim for 18%-23% growth. The slowdown was due to cautious disbursements in microfinance and vehicle finance. We expect growth to pick up in the coming quarters.
Q: Can you provide more details on the states where microfinance collections were impacted and the measures taken?
A: We slowed down business in states like Odisha, Eastern UP, Punjab, and Jharkhand due to overleveraging and stress. However, we are seeing good business in Karnataka, parts of West Bengal, Rajasthan, and Maharashtra. Our processes allow us to identify early trends and exit risky areas.
Q: How should we look at the credit-deposit (CD) ratio given the 18%-22% growth target?
A: Our CD ratio is currently at 87.2%, within our target range of 88%-90%. We have initiatives to raise deposits and expect to achieve 17%-18% deposit growth this quarter. We are confident in managing our CD ratio within the stated range.
Q: What is the impact of the recent LCR draft guidelines by RBI?
A: We are assessing the impact, but preliminarily, it could be in the range of 4%-5%. The guidelines aim to ensure liquidity and stability in the banking system, which we believe is beneficial for the overall health of the sector.
Q: Can you explain the drop in card fees this quarter and the future outlook?
A: The drop was due to regulatory changes eliminating over-limit fees and rental interchange, and lower acquisition of high-end accounts. These changes are structural, but we plan to rebuild the card business and focus on high-end cards.
Q: What are your thoughts on the auto cycle and its impact on vehicle finance?
A: We believe the commercial vehicle segment is at its peak, but other segments like tractors and cars are expected to see high single-digit to double-digit growth.
Q: How do you plan to achieve 18%-22% growth in the current environment?
A: Our growth will be driven by segments like vehicle finance, microfinance, and merchant acquiring, which are expected to grow at 20%-24%. Retail business will grow at 28%-30%, and corporate segments will also contribute significantly.
Q: What is the impact of the penal interest circular on NIMs this quarter?
A: The impact is about INR30 crores for the quarter. We are looking at ways to manage this by increasing yields.
Q: Can you provide more details on the increase in yield on investments?
A: The increase was due to investments in AAA-rated public sector banks, which led to a slight rise in yields.
Q: What is the status of your tenure and the Board's recommendation for extension?
A: The Board has until September to send a recommendation. They are expected to apply for an extension by August or early September.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
